Biden’s plan to cancel student loans and cut monthly repayments could drive the country towards a deeper recession, a federal watchdog group argued on Thursday.
Marc Goldwein, senior vice president and senior policy director for the Committee for a Responsible Federal Budget (CRFB), a fiscal watchdog group, testified before the Committee on Education & the Workforce Thursday morning about the current student loan crisis. The Biden administration’s plan to continue the lingering pause on student debt repayment, changes to the income-driven repayment program and the “blanket debt cancellation” promise will worsen the national economy, he argued. (RELATED: ‘I Was Pleased’: Republican Attorneys General Optimistic SCOTUS Will Rule In Their Favor In Student Loan Case)
The Biden administration extended a student loan repayment freeze that was enacted under the Trump administration during the COVID-19 pandemic until June 2023 — or when litigation holding up its debt cancellation plan is resolved. The Supreme Court heard oral arguments regarding its debt cancellation plan, announced in August and would cancel up to $20,000 in student loan debt for Pell Grant recipients and $10,000 for those who are not, in February.
“Rather than support economic growth as this policy would have done early in the pandemic, now it’s stoking inflation and increasing our risk of recession,” Goldwein said. “We have estimated the pause has added about 20 basis points to the inflation rate, and that the president’s cancelation policy would add about 25 basis points.”
The Federal Reserve will enact “tighter monetary policy and high rates,” which results in “financial turmoil” that is reflected in the recent banking crisis, problems in the housing sector and could “put us into a recession,” Goldwein warned. Biden’s policies would also “worsen the very outcomes they’re trying to improve.”
TUNE IN NOW to the Higher Education and Workforce Development subcommittee’s hearing:
“Breaking the System: Examining the Implications of Biden’s Student Loan Policies for Students and Taxpayers” https://t.co/p0jM3C9u3F
— House Committee on Education & the Workforce (@EdWorkforceCmte) March 23, 2023
“I have no doubt that many supporters of these policies have good intentions, but we’re not focused on the unintended consequences,” Goldwein said. “If the court allows the president’s unilateral debt cancellation to continue, the student debt program will become more like tuition roulette.”
Under the plan, borrowers won’t “really know in advance” what they will pay back “because of the arbitrary nature of this forgiveness,” he warned. Borrowing will rise, tuition will grow and lower quality programs will be offered that “are going to hurt overall education outcomes.”
Thursday’s committee hearing, titled “Breaking the System: Examining the Implications of Biden’s Student Loan Policies for Students and Taxpayers,” heard from four witnesses to understand how Biden’s student loan plans could impact students and taxpayers.
“Creating an offramp for responsibility, driving up college costs, disincentivizing real loan reform, and forcing hard working American taxpayers to pay for someone else’s loans is nothing more than a backdoor attempt at free college with abysmal implications for students, taxpayers, and our economy,” Republican Utah Rep. Burgess Owens, who chairs the committee, said in a statement. “Republicans are working to responsibly reform the nation’s student loan program through Congressional action, and our first subcommittee hearing will tackle this critical issue head-on.”
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